Which of the following may be an indication of inventory theft? COGS is significantly different from the forecast amount a physical count of inventory reveals missing items inventory turnover shows an abnormal increase gross profit falls significantly e. all of the above

Which of the following may be an indication of inventory theft? COGS is significantly different from the forecast amount a physical count of inventory reveals missing items inventory turnover shows an abnormal increase gross profit falls significantly e. all of the above

Name: Which of the following may be an indication of inventory theft?COGS is
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Description: Which of the following may be an indication of inventory theft?COGS is significantly different from the forecast amounta physical count of inventory reveals missing itemsinventory turnover shows an abnormal increasegross profit falls significantlye.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Explain inventory overstatement. A merchandising company has asked you to advise it on how to detect fraudulent financial reporting. Management wants your help in detecting inventory overstatement. Further, management wants to know how to find evidence of inventory overstatement. Using your own numbers, make up an example to show management the effect of overstating inventory. Show how inventory overstatement at the end of Year 1 carries through to the beginning inventory overstatement in Year 2. Prepare a brief report to management suggesting ways management could detect inventory overstatement.
Physical counts of inventory are never made with perpetual inventory systems. True or False True False
An increasing inventory turnover ratioa. Indicates a longer time span between the ordering andreceiving of inventory.b. Indicates a shorter time span between the ordering andreceiving of inventory.c. Indicates a shorter time span between the purchase andsale of inventory.d. Indicates a longer time span between the purchase andsale of inventory.
As part of your audit of a client’s inventory balance, you created an expectation of what should be the inventory balance by using the gross profit method. The only concern was the difference between your expectation and the client’s financial statements which come in the form of using the gross profit method of estimating inventory as against the client reported balance which is below audit materiality level for audit of inventory. What is the best choice to do next? * A. Discuss with the management the implication of the significant difference and propose an adjusting journal entry accordingly.B. Extend audit procedures by doing further analytical procedures on the inventory balance.C. Extend audit procedures by doing test of details of the account balance.D. Issue an unqualified opinion
Which of the following statements is not incorrect? I. PAS 2 requires the use of the Allowance Method in accounting for inventory write-down. II. There shall always be an allowance for inventory write-down if the net realizable value of inventories is lower than its cost. III. Regardless of what method the company uses in accounting for inventory write-down, the cost of goods sold must always be the same IV. A company may recognize a gain on reversal of inventory write-down even if the cost of inventory exceeds its net realizable value. a. I and II b. None of these c. II and III d. III and IV e. I and IV
If a misstatement of inventory occurs, the net income for-----periods will be misstated
Why is it important for auditors to obtain control information over inventory count sheets or tickets?
A serious exposure for an organization that is connnected with the revenue cycle is the loss of assets. What is the related threat and applicable contrtol procudure associated with this exposure? A. receiving unordered goods; compare to valid order B. billing errors; reconciliation of shipping documents to sales order C. shipping errors, data entry controls D. theft of inventory; documentation of all internal transfers of inventory
A serious exposure in the ordering process of the expenditure cycle is increased inventory costs. What is the related threat and applicable control procedure that address this exposure? A. mistakes in counting; do not inform receiving employees about quantity ordered B. paying for items not received; requiring that all supplier invoices be matched to supporting documents C. purchasing at inflated prices; review of purchase orders D. theft of inventory; periodic physical counts of inventory and reconciliation to recorded quantities E. mistakes in posting to accounts payable; reconciliation of detailed accounts payable to the general ledger control account
1. Which of the following is a control procedure to address the threat of purchasing goods or services at inflated prices? A. Requiring multiple approvals for purchases B. Performing regular physical inventory counts C. Conducting vendor audits D. Implementing encryption for sensitive data 2. Which of the following is not a common error in the expenditure cycle? A. Recording the wrong purchase order number B. Recording the wrong vendor name for goods received C. Recording the wrong quantity of goods received D. Recording the wrong price for goods received 3. The primary objective of internal controls in the expenditure cycle is to: A. Ensure the accuracy and completeness of financial transactions B. Streamline the procurement process C. Minimize the cost of purchases D. Increase the speed of payment processing
A retail business like Best Buy experiences some loss of inventory due to shoplifting, employee theft, or errors. The difference between the physical inventory count at the end of the accounting period and the balance of Merchandise Inventory in the accounting records is called ___________. Group of answer choices inventory reduction. inventory theft. inventory loss. inventory shrinkage or inventory shortage.
Which of the following statements about the use of the FIFO assumption is NOT true? a.The FIFO assumption assigns the more recent purchase costs to the balance sheet inventory asset account. b.The FIFO assumption is not affected by the inventory control method. c.In periods of rising prices it produces a higher profit than LIFO. d.The FIFO assumption produces inventory asset values that are based on older purchase costs.